Can Verbrec Sustain Margin Gains Amid Major Acquisition and Divestment?

Strong Financial Performance in FY2025

Verbrec Limited has delivered a standout financial performance for the fiscal year 2025, posting its highest gross margin since 2015 at 37.3%, up from 35.8% the previous year. The company also achieved an adjusted EBITDA margin of 10.3%, the best since 2013, reflecting improved operational efficiencies and profitable growth. Comprehensive profits rose to $3.8 million, nearly doubling from $2.0 million in FY2024, underscoring the company’s strengthening financial position.

Verbrec’s balance sheet also improved significantly, with net assets increasing to $23.8 million and cash reserves rising to $7.1 million. This financial robustness has enabled the company to re-establish dividend payments, marking the first dividend since 2013, supported by $5.7 million in franking credits.

Strategic Acquisition and Divestment Moves

In a transformative move, Verbrec signed an agreement to acquire Alliance Automation from Telstra for an upfront cash consideration of $5.5 million. This acquisition, expected to complete by the end of 2025, will add over $60 million in annualised revenue and expand the combined group to approximately 700 employees across 18 locations in Australia and New Zealand.

Alliance Automation brings a strong digital and automation capability, with expertise in Industry 4.0, cyber security, operational technology, and emerging fields like machine learning and artificial intelligence. The acquisition aligns closely with Verbrec’s integrated delivery model and sustainability focus, enhancing its ability to serve clients across the entire asset lifecycle.

Simultaneously, Verbrec divested its Competency Training business to RelyOn for $11.5 million. This sale is intended to further strengthen Verbrec’s balance sheet and free up capital to invest in core growth areas and future acquisitions aligned with its sustainability purpose.

Synergies and Growth Prospects

The combined entity is well positioned to leverage significant synergies, including cost savings from office consolidations, ICT systems, insurance, and travel expenses. Management is confident in improving EBITDA margins further, targeting a range of 8% to 10% for the merged group. The complementary client bases and sector diversification, Verbrec’s strength in energy and Alliance Automation’s focus on water, mining, and infrastructure, provide a resilient revenue foundation.

Verbrec’s leadership has demonstrated a strong track record of operational improvement, having lifted EBITDA margins from negative territory in FY2023 to over 9% in FY2025. The acquisition is expected to accelerate this momentum, expanding geographic reach and service offerings in a market driven by rising demand for automation, cyber security, and digital transformation.

Governance and Shareholder Engagement

At the FY2025 Annual General Meeting, shareholders overwhelmingly supported key resolutions including the adoption of the remuneration report, the re-election of director Brian O’Sullivan AM, and approval for additional placement capacity of up to 10% of issued capital. These governance outcomes reflect strong investor confidence in the company’s strategic direction and management team.

Verbrec continues to engage actively with its investor community through its Investor Hub, emphasizing transparency and ongoing communication as it navigates this next phase of growth.